This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
• Only a small proportion of latent entrepreneurs, or those who would prefer to be entrepreneurs rather than being paid employees, start their own businesses.
• A lack of access to capital is often the biggest roadblock for latent entrepreneurs to materialize the goal of starting their own business.
• For most potential entrepreneurs in many developing countries, a village loan shark is the only available source of capital, whose interest rate is 200-300 percent a year.
• Muhammad Yunus won the Nobel Prize for his development of microcredit as a way of financing small ventures.
• For countries where the government provides most of the venture capital, there is a significant aversion to risk compared to private sources.
– This is true even in the US. Rhode Island made a venture investment in Curt Schilling’s computer game company which Massachusetts declined to make. The company moved to Rhode Island, but eventually failed and resulted in both political and legal repercussions.
– In the 2012 Presidential Elections certain investments in solar energy companies –especially $536 million in Solyndra –became a huge issue.
• Credit rating agencies (CRAs) analyze and evaluate the creditworthiness of corporate as well as sovereign issuers of debt securities. A sovereign rating is aimed at "measuring the risk that a government may default on its own obligations in either local or foreign currency. It takes into account both the ability and willingness of a government to repay its debt in a timely manner
• Standard and Poor's ratings, Moody's ratings and Fitch's ratings are among the most widely used credit ratings.
• Studies conducted by international economists for both developed and developing economies have indicated that a small number of variables explain 90% the variation in the ratings. They include GDP per capita, GDP Growth, Inflation rate, the ratio of non-gold foreign exchange reserves to imports, the ratio of the current account balance to GDP, default history and the level of economic development.
• In the mid-1990s, some European economies such as Italy and Belgium spent over 12 percent of their GDP for debt servicing. Credit rating agencies and investors perceived the situation as a symptom of major financial weakness hindering entrepreneurship. Likewise, in January 2008, the credit rating agency, Moody’s warned that the U.S. was at a risk of losing its triple-A credit rating, which was held since 1917.
• In 2011 Standard and Poor’s Lowered the US Credit rating from AAA to AA+
• Greece is at present (June 2015) in desperate negotiations for a credit rescue from the European Union to avoid credit default and a possible exit from the Euro.
• Doing Business 2016: Measuring Regulatory Quality and Efficiency. – Washington, DC: World Bank. DOI: 10.1596/978-1-4648-0667-4. License: Creative Commons Attribution CC BY 3.0 IGO
1 Singapore 2 New Zealand 3 Denmark 4 Korea, Rep. 5 Hong Kong 6 United Kingdom 7 United States 8 Sweden 9 Norway 10 Finland 11 Taiwan, 12 Macedonia, 13 Australia 14 Canada 15 Germany
16 Estonia 17 Ireland 18 Malaysia 19 Iceland 20 Lithuania 21 Austria 22 Latvia 23 Portugal 24 Georgia 25 Poland 26 Switzerland 27 France 28 Netherlands 29 Slovak Republic 29 Slovenia
33 Spain 34 Japan 38 Mexico 45 Italy 48 Chile 51 Russia 53 Israel 60 Greece 73 South Africa 116 Brazil 130 India 138 Pakistan 169 Nigeria 186 Venezuela
Here is how the World Bank Ranked countries in 2016 for their ease of doing business. I have included the first 30 and then selected other countries. Procedures, time, cost and paid-in minimum capital to start a business. Criteria: • Procedures, time and cost to complete all formalities to build a
warehouse • Procedures, time and cost to get connected to the electrical grid • Procedures, time and cost to transfer a property • Movable collateral laws and credit information systems • Minority shareholders’ rights in related-party transactions and in
corporate governance • Payments, time and total tax rate for a firm to comply with all tax
regulations • Time and cost to resolve a commercial dispute • Time, cost, outcome and recovery rate for a commercial insolvency and
strength of the legal framework for insolvency • Quality of building regulation and its implementation • Reliability of electricity supply, transparency of tariffs and price of
electricity • Quality of the land administration system • Quality of judicial processes
• Some developing countries, however, have made a considerable progress in establishing regulative institutions that are conducive to entrepreneurship development.
• The Baltic Republics have made the most progress. The 2016 World Bank rankings are in parentheses:
– Estonia(16), Lithuania(20), and Latvia (22)
• The four Visegrad countries are remarkable examples of economies that have successfully promoted the growth of small and medium sized enterprises (SMEs). Poland(25), Slovakia(29), Czech Republic(36), Hungary (42),
• In the early years of transition programs related to SME promotion got higher priority in these countries’ national strategies, which led to the development of entrepreneurship in these countries.
• Formal institutions associated with policies and regulations in areas such as science, technology, intellectual property rights (IPR) and labor mobility are linked to a country’s entrepreneurial performance. In the absence of strong property rights, investment and entrepreneurship face a number of roadblocks.
• Societies across the world vary greatly in their risk-taking behavior.
• In the Arab world, for instance, large corporate bureaucracies are found to be risk averse.
• The lack of a tradition of private entrepreneurship in central and eastern European countries is also related to an underdeveloped risk taking culture in the absence of local norms and social networks providing support for such a culture. For instance, Russian managers with experience in state-owned enterprises tend to avoid risk.
• Likewise, it is suggested that Chinese tend to lack characteristics needed to be a successful entrepreneur such as risk taking.
• I strongly disagree with the contention. I think it is exactly the opposite.
• Consider, for instance, the Chinese venture capital (VC) landscape. Most VC funds in the country are linked to the government and can be considered as a loan. Enterprises that are able to obtain VC funds feel an obligation not to lose the resources. Moreover, an incubator losing the government owned money also becomes a target of official criticism. Chinese government VC funds thus cannot accept the Western level of risk taking.